Week ending 22nd November 2019

World Markets at a Glance

US/China trade talks continued to dominate global equity market sentiment.

The week started positively after it was signalled that the US and China were edging towards an initial trade agreement (phase 1), following constructive discussions between China’s Vice-Premier Liu He, US Trade Representative Robert Lighthizer and US Treasury Secretary Steven Mnuchin.

Unfortunately, global equity markets reversed these gains as the week progressed amid concerns that a US bill supporting Hong Kong’s autonomy could throw a spanner in the trade negotiations – and if the phase 1 deal isn’t signed by 15 December 2019, then there is a good chance the next round of US tariffs on Chinese goods will kick-in.

However, losses were pared as sentiment changed again today (Friday 22 November 2019), after Donald Trump said a deal was “very close”, while his Chinese counterpart, Xi Jinping, said China wanted to reach a deal – albeit based on “mutual respect and equality”.

Elsewhere, the minutes from the last Fed meeting (held on 29-30 October 2019) showed that there was a reasonable amount of disagreement on the committee, with a number of policymakers not happy about the third back-to-back interest rate cut, despite agreeing that the risks to the US economy remained elevated. This probably explains why the Fed agreed to put interest rates on hold barring a “material reassessment” of the outlook.  We aren’t sure exactly what the Fed means by “material reassessment” and therefore what would prompt the Fed to cut interest rates again, but no doubt we will find out next time they cut interest rates!

Despite having a compressed week in the US due to Thanksgiving (Thursday 28 November 2019), we still have plenty of data.  From the US we have consumer confidence, the second reading of Q3 US GDP; durable goods orders; and the Fed’s Beige Book. Elsewhere we have Eurozone confidence, unemployment and CPI; and Japanese industrial production, unemployment and CPI.

Investment Management Team